Basis of presentation

The financial statements are prepared in accordance with Swiss Company Law.

Time period

The financial year 2012 comprises the accounting period from 1 January 2012 to 31 December 2012, whereas the financial year 2011 comprises the accounting period from incorporation on 2 February 2011 to 31 December 2011.

Use of estimates in the preparation of annual accounts

The preparation of the annual accounts requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as the related disclosures. Actual results could differ from these estimates.

Foreign currency translation

Assets and liabilities denominated in foreign currencies are converted into Swiss francs at year-end exchange rates with the exception of participations, which are maintained in Swiss francs at historical exchange rates. Income and expenses are converted into Swiss francs at average exchange rates for the reporting year.

Cash and cash equivalents

Cash and cash equivalents include cash at bank, short-term deposits and certain short-term deposits in money-market funds with an original maturity of three months or less. Such current assets are held at nominal value.

Short-term investments

Short-term investments contain investments with an original maturity of between three months and one year. Such investments are carried at cost, less necessary and legally permissible depreciation.

Receivables from subsidiaries and affiliated companies / Other receivables

These assets are carried at nominal value. Value adjustments are recorded where the expected recovery value is lower than the nominal value.

Accrued income

Accrued income includes other expenditures incurred during the financial year but relating to a subsequent financial year, and revenues relating to the current financial year but which are receivable in a subsequent financial year.

Investments in subsidiaries and affiliated companies

These assets are carried at cost, less necessary and legally permissible depreciation.

Own shares

Own shares are carried at cost, less necessary and legally permissible depreciation.

Loans to subsidiaries and affiliated companies

Loans to subsidiaries and affiliated companies are carried at nominal value. Value adjustments are recorded where the expected recovery value is lower than the nominal value.

Payables to subsidiaries and affiliated companies / Other liabilities

These liabilities are carried at nominal value.

Accrued expenses

Accrued expenses consist of both income received before the balance sheet date but relating to a subsequent financial year, and charges relating to the current financial year but which are payable in a subsequent financial year.

Provisions

The provision for taxation represents an estimate of taxes payable in respect of the reporting year.

The provision for currency fluctuation comprises the net effect of foreign exchange gains and losses arising from the revaluation of the opening balance sheet and the translation adjustment of the income statement from average to closing exchange rates at year-end. These net impacts are recognised in the income statement over a period of up to three years. Where the provision for currency fluctuation results in an overall negative liability provision in a given year, it is set to zero and the difference is recognised in the income statement.

Dividends from subsidiaries and affiliated companies

Dividends from subsidiaries and affiliated companies are recognised as revenue in the year in which they are declared.

Foreign exchange gains and losses

Foreign exchange gains and losses arising from foreign exchange transactions, as well as any changes of the provision for currency fluctuation over time are recognised in the income statement and included in other expenses or other income, respectively.

Capital and indirect taxes

Capital and indirect taxes related to the financial year are included in other expenses. Value-added taxes are included in the respective expense lines in the income statement.

Income tax expense

As a holding company incorporated in Switzerland, Swiss Re Ltd is exempt from income taxation at cantonal /communal level. On federal level, dividends from subsidiaries and affiliated companies are indirectly exempt from income taxation (participation relief). However, income tax is payable on trademark license fees charged to certain subsidiaries and affiliated companies.

Change in accounting policy

As of 1 January 2012, the Company revised its accounting policy for the treatment of foreign exchange gains and losses and their recognition in the provision for currency fluctuation.

In the previous year, foreign exchange gains and losses, consisting of foreign exchange gains and losses arising from the revaluation of the opening balance sheet, the translation adjustment of the income statement from average to closing exchange rates at year-end as well as foreign exchange gains and losses arising from foreign exchange transactions, were deferred in the provision for currency fluctuation. Where the provision was not sufficient to absorb a negative difference, the amount was recognised in the income statement.

As of 1 January 2012, foreign exchange gains and losses arising from the revaluation of the opening balance sheet and the translation adjustment of the income statement from average to closing exchange rates at year-end are deferred in the provision for currency fluctuation and recognised in the income statement over a period of up to three years. Where the provision for currency fluctuation results in an overall negative liability provision in a given year, it is set to zero and the difference is recognised in the income statement. Foreign exchange gains and losses arising from foreign exchange transactions are now recognised in the income statement in the year they occur.

Retroactive application of the revised accounting policy in the previous year would not have had a material impact on the income statement or the provision for currency fluctuation.